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CMA Foundation · Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Mohan guarantees the dues of Bhaskar to Delta Suppliers. Delta Suppliers then makes a contract with Bhaskar, by which Bhaskar is released from his dues in return for assigning his property to creditors. What is the effect on Mohan's liability?

Mohan is discharged from his suretyship. Under Section 134, a contract between the creditor and the principal debtor that releases the principal debtor also discharges the surety, regardless of whether the surety consented to that release.

  1. AMohan remains liable because he did not agree to the release
  2. BMohan is discharged from suretyshipCorrect
  3. CMohan is liable for half the amount only
  4. DMohan's liability is suspended until Bhaskar's property is sold

Explanation

Section 134 states that the surety is discharged by any contract between the creditor and the principal debtor by which the principal debtor is released. Illustration (a) shows the same facts. Mohan's lack of consent does not preserve his liability.

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